Market Review

Recorded at 5.6% growth in 2015, Kenya’s Gross Domestic Product (GDP) remains quite diversified with Agriculture accounting for the lion’s share of the output at 30.0%, followed by Manufacturing at 10.3% and Transport & Storage at 8.4%. The GDP is projected to grow by 6.0% in 2016 (IMF estimates), ranking it among the fastest growing economies in Africa (6th). This will be spurred by ongoing infrastructure projects in both the public and private sectors, acceleration in electricity production and recovery in the tourism sectors. In addition, the African Development Bank puts Kenya’s middle income population at 44.9% of the total population and this proportion is expected to grow in the long-term. A large middle-income population points to a large and growing disposable income and consequently strong domestic consumption. Kenya stands as one of the most stable markets in Africa while boasting of a liberalized market and an independent judiciary system. It has an electricity generation capacity of 2,431MW with electricity access standing at 64% (as at July 2016). The East African region is projected to grow significantly and Kenya offers a unique and preferential access to these markets with a population in excess of 178.9M. Nairobi stands out as a major transport hub in the region with plans ongoing to transform it to a financial services hub.

Kenya in figures

Item

Value

Bloomberg ticker

KNSMIDX

Population

44.2M

Nominal GDP per capita (USD)

1,378

Debt to GDP (%)

52.7

Current account deficit to GDP (%)

5.9

Fiscal deficit to GDP (%)

7.6

Central Bank Rate (%)

10.0

Inflation (%) December

4.5

Languages

- Official

English

-National and Official

Kiswahili

Nairobi Securities Exchange

The Nairobi Securities Exchange (NSE) is the largest securities bourse in East and Central Africa in terms of market capitalization (USD 18.6M as of December 2016) with 84B shares issued in the market. Founded in 1953, NSE is the sole securities exchange in Kenya and is the second self-listed, demutualized exchange in Africa.

The bourse offers an automated trading platform for the trading of multiple securities that comprise stocks and bonds. In an effort to deepen the local capital market, the NSE plans to introduce innovative products including; derivatives, Exchange Traded Funds (ETFs) and carbon credits. It has 66 listed companies (3 suspended) on the equities segment and 91 (1 suspended) products on the fixed income segment. NSE is among the 3 exchanges in Africa offering I-REITs and a D-REIT set to be listed during the course of the year.
In 2016 Equity Turnover amounted USD 1.4B with 5.8B shares being traded during the year. The Kenyan market cemented its liberal stance seeing that in the same period, foreign participation averaged 68.9%.

The bourse is regulated by the Capital Markets Authority (CMA) which is an independent public agency established by an Act of Parliament, Cap 485. CMA is charged with the prime responsibility of supervising, licensing and monitoring the activities of market intermediaries. It facilitates mobilization and allocation of capital resources to finance investments.

Main NSE market indices

NSE-20: By far the most popular index in the Kenyan market. It is a price weighted index that considers 20 blue chip listed companies at the NSE.

NASI: A market cap weighted index that takes into account all the listed companies at the NSE.

With a market capitalization of about KES 2 trillion, Kenya has the largest equity (stock) market in East Africa. Unlike fixed income instruments, investors in equities (shares) become owners of the underlying company and are entitled to voting rights and claims on the earnings and assets of a corporation. Shareholders receive returns on their investment through dividends paid out from the company’s earnings and capital gains resulting from an increase in the company’s share price.

There is one equity market exchange in Kenya: The Nairobi Securities Exchange (NSE) which is regulated by the Capital Markets Authority (CMA).

The NSE has a total of 66 listed companies that span across a wide range of sectors including Banking, Insurance, Commercial and Manufacturing. Using a CDS account, investors trade equities at the NSE through a licensed stockbroker or investment bank.

Our vast experience in the Kenyan equity market, spanning over 20 years, has allowed us to build longstanding relationships and a proven track record for meeting our clients’ investing needs in a timely, efficient and transparent manner.

The fixed income segment of the NSE provides investors with a secondary market for the trading of government and corporate bonds. Fixed income instruments provide investors with payments of a fixed amount on a predefined schedule, providing an ideal platform for wealth creation for risk averse investors.

The Central Bank of Kenya auctions Treasury bonds on a monthly basis, whilst also offering a variety of other bonds throughout the year. Upon completion of the auction, most bonds are listed on the Fixed Income Segment of the NSE for trading.

ApexAfrica’s dedicated fixed income team assists and advises investors looking to participate in this segment whilst also providing a comprehensive framework for investing in fixed income instruments in the primary and secondary market.

The NSE currently lists 66 companies which operate in various sectors of the local economy. Sectors include: Agriculture, Automobiles, Banking, Commercial, Construction, Energy, Insurance, Investment, Manufacturing and Telecommunication.

Safaricom is the largest listed company with a market capitalization of KES 767 billion, followed by East African Breweries at KES 193 billion and Equity Group at KES 113 billion